Overview

Colorado has vast fossil fuel and renewable energy resources.

Colorado is richly endowed with both conventional fossil fuel and renewable energy resources.1 Its diverse geography and geology include the headwaters of major rivers,2 winds that have created new wealth on the open plains,3,4 and substantial deposits of oil, natural gas, and coal.5,6,7 Home to the tallest peaks of the Rocky Mountains, Colorado has the highest average elevation of any state. Wide plains, already more than half a mile above sea level at the Kansas border,8 rise to meet the mountains running north-south down Colorado’s center.9 The majority of Coloradans live where the plains and mountains meet in a region called the Front Range.10

Weather fronts can move in from the west across the mountains or from the east across the plains. Temperatures vary widely depending on elevation and have reached records of 114°F on the plains and 61°F below zero in the mountains.11 With its large Front Range cities like Denver, the state is second only to Arizona among the Rocky Mountain states in both total population and number of people per square mile.12 Nearly 9 in 10 residents live in the metropolitan areas,13 and much of Colorado's mountain areas and plains are sparsely populated.14 Colorado is a winter sports destination, and about 1 in 20 houses is occupied only seasonally.15

Colorado's economy is highly diversified. Major industries include finance, insurance, real estate, professional and business services, agriculture, and tourism.16 Colorado’s per capita energy consumption is below the national average.17 Transportation is the state’s leading energy-consuming sector, followed by the industrial sector.18

Petroleum

Substantial crude oil production comes from the Niobrara Shale in northeastern Colorado.

Colorado accounts for almost 4% of U.S. total crude oil production19 and also holds about 4% of the nation’s proved crude oil reserves.20 Colorado's crude oil production has more than tripled since 2010, partly from the increased use of directional drilling and hydraulic fracturing technologies.21
Oil output declined somewhat in 2016 because of lower crude oil prices, but production rebounded in 2017 and monthly output reached a record high as oil prices increased.22,23,24,25 Substantial new production is coming from the Niobrara Shale formation located in the Denver-Julesburg Basin in northeastern Colorado,26 where oil production in one county, Weld, is the source of 9 out of every 10 barrels of crude oil produced in Colorado.27,28 The Wattenberg field, much of which is in Weld County,29 is the fourth largest U.S. oil field based on proved reserves.30 The Piceance Basin in the western mountains is the other primary petroleum-producing area in Colorado.31,32

Northwestern Colorado overlays part of the Green River oil shale, a kerogen-rich formation that, by some estimates, could be the world's largest crude oil resource.33 Kerogen is an organic material, found in sedimentary rock, which can be heated to extract crude oil. Although pilot oil- shale projects have been undertaken in the area, current technology for obtaining crude oil from kerogen has not proven economically viable.34

Colorado has two operating petroleum refineries, both in Commerce City near Denver. The refineries are owned and operated as a single complex.35 They produce about 100,000 barrels per day of motor gasoline, diesel fuel, and asphalt. Recent upgrades to the refineries enable them to meet clean fuel regulations and process more crude oil from Canada's tar sands.36 With oil production from the Niobrara Shale increasing, more pipelines are being built or repurposed to move Colorado crude oil to refineries out of state.37 Demand for refined petroleum products in Colorado is about two-and-a-half times more than the state’s refining capacity.38,39 Several petroleum product pipelines, primarily from Wyoming, Texas, and Kansas, help supply the Colorado market, and products are also brought in by rail and truck.40,41,42

The transportation sector accounts for more than four-fifths of all petroleum consumed in Colorado, and much of the rest is used by the industrial sector.43 The Denver-Boulder and Ft. Collins metropolitan areas use oxygenated motor gasoline to limit smog formation. The rest of the state is allowed to use conventional motor gasoline.44,45 In 1988, Denver became the first U.S. city to require the use of cleaner-burning motor fuel during the winter, when motor gasoline was blended with ethanol.46 Colorado has four small ethanol plants that use mainly corn as their feedstocks.47,48 The state’s smallest ethanol plant, located in Golden, uses a brewery’s waste beer as its feedstock.49

Natural gas

Colorado has the sixth largest natural gas reserves in the United States,50 and it is among the top five major natural gas-producing states in the nation.51 Colorado’s natural gas output has more than doubled since 2001.52 Eleven of the nation's 100 largest natural gas fields are located entirely or partially in Colorado.53
Colorado's largest natural gas-producing regions are in the Denver-Julesburg Basin in the northeast and in the Piceance Basin in the west.54 Recently, as natural gas prices have declined, some well drilling activity has moved from the Piceance, which produces mainly dry natural gas, to the Denver-Julesburg Basin, which also produces higher-value crude oil and natural gas liquids.55,56,57 The San Juan Basin that stretches across the Colorado-New Mexico border is also a major natural gas producing area, though output has declined in recent years.58

Colorado holds more than one-third of U.S. total coalbed methane reserves.

Production of coalbed methane from coal seams grew rapidly in the 1990s59 and typically accounted for about one-third of Colorado’s total natural gas production. Recent lower natural gas prices have rendered some coalbed methane wells uneconomic, and production of coalbed methane fell to almost one-fifth of Colorado’s total gross withdrawals of natural gas in 2016.60,61 New Mexico, Colorado, and Wyoming are the leading coalbed methane producers in the United States,62 and Colorado has more than one-third of U.S. proved coalbed methane reserves, more than any other state.63 Nearly all coalbed methane is produced in the San Juan and Raton Basins located in the southern part of the state.64

The residential sector is Colorado’s largest consumer of natural gas, followed by the electric power sector.65 Seven out of 10 households in the state use natural gas as their primary home heating source.66 Consumption of natural gas for electricity generation has increased about 10% since 2001,67 and electric power is Colorado's second-largest natural gas-consuming sector.68 However, the state uses only about one-fourth of the natural gas it produces.69

Colorado has two natural gas trading hubs, Cheyenne in the northeast and White River in the west.

Colorado is crossed by major interstate pipelines that ship natural gas to a dozen states from California to West Virginia.70,71 The state has two natural gas trading hubs at interstate pipeline interconnections.72 The larger Cheyenne hub is located in the Denver-Julesburg Basin,73 and the White River hub is located in the Piceance Basin.74,75 Colorado has a relatively small amount of underground storage capacity, even though it has increased about 25% since 2010.76 Recently, more storage has opened, mainly around the Cheyenne hub, to accommodate seasonal fluctuations in natural gas demand.77

Coal

Colorado ranks 10th among the states in estimated recoverable coal reserves, including bituminous, subbituminous, and lignite coals,78,79 and the state produces coal from both underground and surface mines. Mining is currently focused in the Green River, Piceance, and San Juan Basins.80 Colorado’s coal is used almost entirely for electricity generation, but the market for the state’s coal has decreased as several Colorado mines have closed. However, there has been some limited expansion at existing mines.81,82,83,84, Typically, half of Colorado coal mined for domestic consumption is used for power generation in the state; Colorado coal is also burned for electric power generation in nearly a dozen other states.85,86 More than half of the coal consumed by electricity generators in Colorado is transported by rail from Wyoming.87,88 Colorado producers export the state's low-sulfur, high-heat-value bituminous coal to steel manufacturers overseas,89 but exports have recently decreased due to increased international competition.90,91

Electricity

Coal and natural gas are the primary fuels used to generate electricity in Colorado. Coal-fired power plants provide just over half of the state’s net generation, and natural gas provides almost one-fourth. Electricity from renewable sources has more than doubled since 2010 to around one-fifth of the state’s net electricity generation in 2016, led by increased wind power.92,93 Colorado’s largest utility is replacing some older coal-fired capacity with electricity generation from natural gas and renewable sources94 and is pursuing additional options for variable pricing, large-scale storage, efficiency, and distributed (customer-sited, small-scale) energy.95

Colorado does not have any nuclear power plants.96 The state does have some uranium deposits, but no uranium was mined in Colorado in 2016.97,98 Projects for both mining and processing uranium ore are in development in the state.99 A proposed uranium mill in western Colorado is permitted and licensed, but the project has not been developed.100,101

Colorado uses less electricity per capita than three-fourths of the states.102,103 The commercial sector is the largest consumer of electricity in the state, followed by the residential sector and the industrial sector.104 One in five Colorado households uses electricity as the main home heating source.105 Typically, total electricity consumption slightly exceeds in-state generation,106,107 and the state is connected by high-voltage transmission lines to Wyoming, Nebraska, New Mexico, Utah, and Kansas.108

Renewable energy

Renewable energy is considered a key industry in Colorado.109 In 2004, Colorado became the first state with a voter-approved renewable portfolio standard (RPS). The legislature has increased the requirements several times, and the RPS now requires 30% of electricity sold by investor-owned utilities to come from renewable energy sources by 2020, with 3% from distributed generation. Separate requirements apply to municipal and cooperative electricity suppliers depending on their size.110,111 The RPS and other state support for the efficiency and renewable energy industries have attracted private investment and have made Colorado a renewable energy industry leader.112 In 2017, the state’s largest utility joined with other groups to file an energy plan with Colorado’s Public Utilities Commission that would add 1,000 megawatts of wind power and 700 megawatts of solar power generating capacity in the state.113

Colorado was the first state with a voter-approved renewable portfolio standard.

Colorado has significant wind resources on its eastern plains and mountain crests, and the state has substantial solar resources, especially in the south near the New Mexico border.114,115 In 2016, wind turbines accounted for about three-fourths of all renewable electricity generation, followed by hydroelectric facilities that contributed almost one-fifth.116 In 2016, Colorado had about 1,900 wind turbines with a total capacity of just over 3,000 megawatts, making Colorado 10th nationwide in wind power generating capacity.117

The federal government has identified four Colorado areas that are potentially suitable for utility-scale solar development.118 In 2016, Colorado was ranked 10th among the states in installed solar capacity119 and 11th in the nation in solar electricity generation. The share of the state’s solar power from utility-scale generating facilities is slightly larger than the solar generation from its small-scale residential and commercial distributed facilities.120 Colorado offers rebates to encourage homeowners and businesses to install solar panels, including solar gardens—collections of panels shared by several homes.121 State electric utilities are also investing in larger- scale solar projects.122 Planning is under way for transmission-line expansions to bring utility-scale renewable electricity both to Colorado population centers and to cities in other western states.123,124 Small-scale applications of renewable technologies such as wind power, solar energy, and methane recovery are used in several industries, including breweries.125,126

There are about 60 small hydroelectric generators in Colorado’s mountainous western region.127,128 The state encourages development of small-scale hydropower projects that have minimal environmental impact, including turbines on irrigation lines.129 Colorado negotiated a pioneering agreement with the U.S. Federal Energy Regulatory Commission to speed the permitting process for low-impact hydropower facilities.130 Colorado's first commercial-scale woody biomass plant, which burns waste gathered from surrounding forests, consumes trees culled as part of efforts to fight pine beetle infestations.131,132 Other biomass projects are in development.133,134 Colorado has a number of hot springs, and studies indicate that the state has significant geothermal potential.135 Some federal lands have been leased for geothermal projects in Colorado.136,137 The state’s geothermal resources are mainly used for heating or cooling homes, businesses, and even Colorado’s state capitol building in Denver, but there are no utility-scale projects that generate electricity with geothermal energy.138,139